PowerPoint on Pricing Strategy Lesson 2 Midterm.pptx

Pricing Strategy Lesson 2 Midterm.pptx

1. PRICE COMMUNICATION Pricing Strategy 2023

2. Pricing brings in the revenue. This is the only element in the marketing mix  that brings in the revenues. All the rest are  costs. Price communicates the value positioning of  the product. Price Communication ‹#› 2023

3. The Pricing Objectives: To survival To maximize current profit To maximize market share Pricing Communication ‹#› 2023 4. To maximize market skimming 5. To ensure product-quality relationship

4. Determining Demand Each price will lead to a different level of demand and have a different impact on a company’s marketing objectives. Demand and price are inversely related i.e. The higher the price, lower the demand. Company needs to consider : Price Sensitivity Price Elasticity Price Communication ‹#› 2023

5. What Influences Price Sensitivity?  Shared cost ( part of cost is borne by other party )  Sunk investment (product used is required as a complement to earlier purchase )  Inventory effect ( buyers can not store the product )  Items bought more frequently ( more sensitive ) / infrequently ( less sensitive )  Unique value effect ( quality , prestige or exclusiveness ) Pricing Communication ‹#› 2023  Substitute awareness by buyers  Difficult comparison by buyers  End benefit ( expenditure small part of total income )  Total expenditure ( purchase cost is insignificant compared to the cost of end product )  Low – cost items (less sensitive ) / high cost items ( more sensitive )

6. What is Price Elasticity  This determines the changes in demand with unit change in price.  If there is little or no change in demand, it is said to be price inelastic.  If there is significant change in demand, then it is said to be price elastic. Price Communication ‹#› 2023

7. Demand is less likely to be elastic when:  There are few or no substitutes.  Buyers readily do not notice the higher price.  Buyers are slow to change their buying habits.  Buyers think that the higher prices are justified. Price Communication ‹#› 2023

8. Examples of Discounts and Allowances  Early payment  Off – season  Bulk purchase  Retail discount  Cash discount  Trade in allowance Price Communication ‹#› 2023

9. When do we Initiate Price Cuts?  Excess plant capacity  Competition  Aggressive pricing Price Communication ‹#› 2023

10. When do we Initiate Price Increases?  When demand exceeds supply  When costs go up  Govt. policies Reduce or remove discounts and rebates Price Communication ‹#› 2023

11. Indirect Price Increases  Shrinking pack size for same price  Substituting less expensive raw materials  Reducing product features  Removing product services  Using less expensive packaging material  Reducing the no. of packs and sizes offered  Creating new economy brands Price Communication ‹#› 2023

12. Reaction to Price Changes  Customer reaction  Competitor reaction Price Communication ‹#› 2023

13. How to Respond to Competitor Price Change  Maintain price  Maintain price and add value  Reduce price  Increase price and quality  Launch a low price fighter Price Communication ‹#› 2023

14. How to Introduce Price Change to your Customers? Contact them directly. Let customers know well in advance. Remind them that higher prices mean better quality. Explain the reasoning behind the price increase. Ensure the entire organization is aware of the price increase before announcing it to customers. Allow customers to reach out with further questions or concerns. Price Communication ‹#› 2023

15. THANK YOU! 2023